Westland plans sale to Yili

The board has signed a conditional agreement to sell to Hongkong Jingang Trade Holding Co, a wholly owned subsidiary of Inner Mongolia Yili Industrial Group, for $3.41 a share.
Yili is Asia’s biggest dairy company and has owned Oceania Dairy in South Canterbury since 2013.
“The board believes that the proposed transaction represents the best available outcome for our shareholders and has the unanimous support of the Board,” chairman Pete Morrison said.
“The acquisition price represents an attractive price to the Westland shares’ nominal value.”
Shareholders will vote at a special meeting, probably in early July 2019.
Jingang promises to collect milk from existing Westland suppliers and pay a competitive farmgate price of a minimum of the Fonterra farmgate milk price for 10 seasons from August 1.
A supplier committee of five existing suppliers and five representatives from Westland under the new ownership will be formed to maintain communications and transparency between existing Westland suppliers and Westland.
The proposed transaction follows a strategic review by the board.
At the end of the review the board initiated Project Horizon – a process to explore future capital and ownership options to provide a long-term solution for shareholder farmers following Westland’s inability to deliver a competitive milk payout in recent years.
“The board confidentially engaged with over 25 parties in a competitive process to seek indications of interest in a cornerstone investment in Westland or a full acquisition or merger with Westland,” Morrison said.
“The board then shortlisted a small number of parties to participate in detailed financial, legal and operational due diligence and to review and negotiate potential transaction documents with Westland.
“A detailed shareholder booklet containing information relating to the proposed transaction, the independent adviser’s report, the reasons for the director’s unanimous recommendation and shareholder meeting information is currently expected to be provided to our shareholders in mid June 2019.  
“We will also hold farmer consultation meetings to discuss the proposed transaction and information provided to date.
“We will also brief staff, customers and key stakeholders on the deal,” Morrison said.
The sales needs approval of 75% or more of the votes of shareholders who vote and more than 50% of the votes of all shareholders entitled to vote.
It also requires High Court and Overseas Investment Act approval.
Since buying Oceania Yili has invested about $650m establishing milk powder, infant formula and UHT production lines.
In recent years it has provided its supplying farmers with a payout higher than the average industry payout, Morrison said.
Yili has an estimated 22% market share in China.